Thiruvananthapuram: The Kerala government has raised the interest rate for short-term fixed deposits in the treasuries amidst controversies in the cooperative banking sector.
The move is aimed at wooing investors who withdraw fixed deposits from cooperative banks in the wake of the recent bogus loan episodes. The measure is expected to help the government sector retain investments and reduce the flow to public sector banks.
A majority of public sector banks are already providing higher interest rates for short-term deposits than that of the treasuries. The Treasury department hiked the interest rate from October 1, also taking this into consideration.
Many primary cooperative banks have currently imposed restrictions on the withdrawal of fixed deposits. They have reduced the maximum limit that can be withdrawn in a single transaction to Rs 2 lakh.
A lot many of those who withdraw their investments from cooperative banks reinvest them in the treasuries. Though banks are offering higher interest for fixed deposits by senior citizens, the treasuries provide high interest rates to all categories without any specific classification.
Investors in large numbers are also opting for the ‘Nettam’ Deposit scheme of the Kerala State Financial Enterprises (KSFE) under which 8 per cent interest per annum is offered.